Toll and subsidy for freight vehicles on urban roads: A policy decision for City Logistics

Abstract

Toll roads constructed under public-private-partnerships (PPP) are very common around the world. Due to the high capital cost invested and high risks associated with subsequent returns, investors are concerned about future revenue. Charging high tolls from freight vehicles is a common practice, especially in urban areas. As a result, freight vehicles tend to divert from freeways (toll roads) to highways and arterial roads to minimize their costs, but this may cause more damage to infrastructure and environment, thus more costs for society and the environment. Consequently, developing an effective solution for toll charges for freight vehicles is a complex City Logistics problem involving multiple stakeholders with multi-objectives.

This research investigates total costs (economic, social and environmental) associated with freight transportation based on existing toll structures for a toll road in Melbourne, Australia. Using a real case study, a step by step process was developed to illustrate the inefficiencies that exist in the present rigid toll charging mechanisms and how these inefficiencies can be corrected considering multi-stakeholder objectives and the overall impacts. This research identifies an optimal set of solutions that can be considered by decision-makers for implementation considering trade-offs between multiple management objectives. By considering subsidies, this research also identifies a good practical solution for minimizing the total cost of urban freight transportation while satisfying the investor needs. This policy decision is illustrated and related issues are discussed.